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Competition and price dispersion in the airline markets

Author

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  • Durba Chakrabarty
  • Levent Kutlu

Abstract

We use two ticket-level data sets on one-way domestic flights for the US airlines to examine the potentially nonlinear relationship between price dispersion and three forms of competition: inter-firm, inter-flight and frequency competitions. The linear relationship is rejected at any conventional significance levels. In particular, there is an S-shaped relationship between market concentration and price dispersion. This can be a reason for the mixed results in the literature. Roughly speaking, the inter-flight and frequency competitions have opposite effects on price dispersion. Finally, in general, the size of aircraft has a positive effect on price. However, for very large aircraft, the relationship becomes negative.

Suggested Citation

  • Durba Chakrabarty & Levent Kutlu, 2014. "Competition and price dispersion in the airline markets," Applied Economics, Taylor & Francis Journals, vol. 46(28), pages 3421-3436, October.
    • Handle: RePEc:taf:applec:v:46:y:2014:i:28:p:3421-3436
    DOI: 10.1080/00036846.2014.931919
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    Cited by:

    1. Debashrita Mohapatra & Debi Prasad Mohapatra & Ram Sewak Dubey, 2023. "Price dispersion across online platforms: Evidence from hotel room prices in London (UK)," Papers 2310.12341, arXiv.org.
    2. Florent Laroche & Ayana Lamatkhanova, 2020. "Effects of open access competition on prices and frequencies on the interurban railway market: evidence from Europe," Working Papers halshs-02930864, HAL.
    3. Florent Laroche & Ayana Lamatkhanova, 2021. "Effects of open access competition on prices and frequencies on the interurban railway market: evidence from Europe," Post-Print halshs-02930864, HAL.
    4. Mustafa U. Karakaplan & Levent Kutlu, 2019. "Estimating market power using a composed error model," Scottish Journal of Political Economy, Scottish Economic Society, vol. 66(4), pages 489-510, September.
    5. Levent Kutlu & Robin C. Sickles, 2017. "Measuring market power when firms price discriminate," Empirical Economics, Springer, vol. 53(1), pages 287-305, August.
    6. Levent Kutlu, 2015. "Limited Memory Consumers and Price Dispersion," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 46(4), pages 349-357, June.
    7. Levent Kutlu & Ran Wang, 2018. "Estimation of cost efficiency without cost data," Journal of Productivity Analysis, Springer, vol. 49(2), pages 137-151, June.
    8. Tomasz Stanisław Szopiński & Robert Nowacki, 2015. "The Influence of Purchase Date and Flight Duration over the Dispersion of Airline Ticket Prices," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 9(3), September.

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